Archive - Jun 7, 2010 - Story

The latest casualty of the European contagion is sleepy, quiet, french-fry and beer specialist Belgium. The country's 10 Year bonds have gone vertical on ever increasing concerns the European core is just as messed up as the periphery. Look for this hockeysticking to add even more tightness to German Bund spreads, until one day the market wakes up and realizes the only country it can now short is Germany itself. That will be game over for Europe.

Volume up - sell, volume down- buy. Rinse, repeat. RoboTrader 3000 is back from Robo Hampton. At least doing the return trip to the closest latency arbitrage/front running NYSE collocation facility on the Long Island fiberoptic network is so much more fun than driving.

Friday's usage of the ECB's overnight deposit facility hit an all time high of €350.9 billion, an increase of €50 billion from the day before, as the panic among Europe's banks exploded on Hungary statement it was about to fail. And even with Hungary now rapidly backtracking, apparently all new to this currency confidence manipulation thing, the rating agencies have now woken up, and as we all know, hell hath no fury like a rating agency scorned that it is a few decades behind the curve (speaking of which, when will Moody's finally hire a replacement to its recently departed global head of sovereign research?). As Reuters reports, Moody's analyst Dietmar Hornung said Monday: "The statements are a credit negative because they bring renewed attention to Hungary's high public and external debts, which, by threatening to drive up interest rates and push down the exchange rate, endanger Hungary's economic recovery." Fitch and S&P followed suit: "David Heslam, director of Fitch Ratings' emerging Europe sovereigns, said the comments would not affect Hungary's funding options but ultimately played into a "key ratings driver" -- its fiscal path. "We are concerned about the fiscal outlook post-elections... Given the high level of debt, there is little room for policy slippage." Standard & Poor's, which has Hungary's ratings at BBB- with a stable outlook, said in a statement: "We will review the government's report on public finances and the government's action plan before we would comment further."

With even Jim O'Neill giving up on China and the BRICs, Goldman will milk every last drop out of the rapidly deliquifying country. Case in point: Goldman upgrades recent dog Amazon from mere mort Buy to Conviction Buy, upping its price target, completely contrary to the price action, from $180 to $190. The premise being after a few hundred million Americans bought electronic books, only to remember they hate reading, the same will happen in China: We expect Amazon’s China business to help accelerate its global customer growth rates through 2010."

A week ago Mr. BRIC O'Neill was making fun of the "grizzlies"... now, he is making fun of himself. Is humility really possible at Goldman staffers, or is this just part of the whole reverse psychology trap? Here are, stunningly, ten reasons why one should be, gasp, bearish on the market, from one of the biggest permabulls in the world.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 07/06/10

And you thought Goldman had it bad in the US. The FT reports: "Many people believe Goldman Sachs, which goes around the Chinese market slurping gold and sucking silver, may have, using all kinds of deals, created even bigger losses for Chinese companies and investors than it did with its fraudulent actions in the US,” read the opening lines of an article in the China Youth Daily, a state-owned daily newspaper, last week." Matt Taibbi - you have met your match, and the outcome is picturesque indeed - a vampire squid that slurps and sucks its way to every loose ounce of gold and silver. But fear not, all those millions of ounces in GLD are perfectly safe and sound.